• The economic future of California is heavily dependent on the strength of science and technology in the state. And the future of science and technology in California depends strongly on the federal government's commitment to the support of R&D.
• More than one-fifth of all the research and development conducted in the United States is conducted in California, $33.7 billion in 1993, the most recent year for which reliable data are available. If California were a separate nation, it would be the fourth largest R&D performer in the world, behind only the U.S., Germany, and Japan.
• California regularly receives nearly a quarter of the federal government's spending on R&D, about $14 billion worth in 1993. On a per capita basis, this is nearly twice the national average.
• Over three-quarters of California's R&D in 1993 ($26.5 billion) was performed by industrial firms. Most of this money supported product development and was funded by firms with their own money, but nearly a third was funded by the federal government. Almost a quarter of all U.S. industrial R&D is performed in California.
• The Department of Defense (DOD) supplies nearly two-thirds of total federal support for R&D in California. In fiscal year 1993, $9.7 billion of DOD R&D went to California, most of it to industrial firms. California regularly receives between a quarter and a third of DOD's total R&D spending.
• California universities conduct $2.4 billion in R&D, over two-thirds ($1.5 billion in FY 1993) of which is funded by the federal government. Stanford, CalTech, and UC San Diego rely on the federal government to finance over 80 percent of their research.
• The Department of Health and Human Services (mainly the National Institutes of Health) is the largest sponsor of R&D at California universities, with $800 million in FY 1993, followed by the National Science Foundation ($250 million) and DOD ($160 million).
• Three California universities rank among the top ten recipients of federal R&D. Stanford, ranked number three, received $250 million in federal R&D funds in FY 1993, while six others received at least $100 million.
• California is home to several of the nation's largest federally funded research and development centers (FFRDCs). Together they performed $2.1 billion in R&D in FY 1993 for the federal government. The Lawrence Livermore National Laboratory in Berkeley (DOE) and the Jet Propulsion Lab in Pasadena (NASA) each receive over $750 million annually for R&D from the federal government.
• AAAS estimates that the President's latest budget plan calls for defense R&D to decline by about 32 percent in real terms over the next six years. Congressional and Administration budget plans call for nondefense R&D to decline by about one-fourth in real terms by 2002, according to current AAAS estimates. California's share of federal R&D will almost certainly follow these national trends.

California, the most populous state with the largest state economy, is the national leader in research and development. Not only is it an absolute leader because of the sheer size of the state economy, California also accounts for a disproportionate share of the nation's total R&D effort. With a population of 31.4 million, about 12 percent of the U.S. population, California accounts for nearly a quarter of the U.S. effort in R&D across a variety of sectors and is dependent on the products of R&D from oenology to microelectronicsfor the health of its overall economy.

California is a world leader in science and engineering activity as measured by R&D performance. R&D accounts for 4.3 percent of the state's economy (as measured by Gross State Product for 1993, the latest year for which detailed figures are available), compared to less than 3 percent for the nation as a whole. California's R&D enterprise totaled $33.7 billion in 1993 out a total state economy of nearly $800 billion. More R&D is performed in California than in all of France or in the United Kingdom. If it was a separate nation, California would thus be the world's fourth largest performer of R&D behind only the U.S., Germany, and Japan.

California's industrial firms account for the bulk of the state's R&D, $26.5 billion worth in 1993. Much of this activity is focused on the needs of industrial firms for new technologies and results in innovative commercial products. Research labs are located all over the state, but cluster around the San Francisco Bay Area, the Greater Los Angeles area, and, to a lesser extent,San Diego. California-based firms are world leaders in information technology, biotechnology, and a host of other research-based industries.

The federal government plays a dominant role in funding R&D in the state. Historically, the federal government has funded a majority of the R&D performed in California and still funds the overwhelming majority of R&D conducted at California universities. Only recently, because of post-Cold War cutbacks in defense R&D and the increasing vitality of R&D spending by industrial firms, has the federal government's role begun to decline slightly. In 1993, the latest year for which detailed statistics are available, the government spent $13.9 billion on R&D in California, over 40 percent of the state's total, a drop from $15.3 billion in 1991.

Federal support for R&D has an impact on a diverse group of performers scattered throughout the state. Only 12 percent of federally-funded R&D is performed in government labs. Nearly two-thirds goes to industrial firms, mostly to defense contractors. California's colleges and universities receive 11 percent, while 14 percent goes to federally funded research and development centers (FFRDCs)labs operated by universities or other organizations that perform research under contract for the federal government. (See Chart 3.)

California's success at winning federal R&D funds has helped build California's strong R&D enterprise and has boosted California's presence in technology-intensive industries. Chart 6 shows that in the 1970s and early 1980s California received about $10 billion a year (in constant FY 1987 dollars) for R&D. This total reached $15 billion in the late 1980s as federal R&D spending, led by defense R&D, boomed toward the end of the Cold War. In the aftermath of the Cold War, federal R&D to California has turned downward.

Chart 7 shows that California consistently received about 25 percent of total federal R&D expenditures, a considerably larger proportion than the state's share of the total U.S. economy and population. Thus, swings in federal R&D support have a disproportionate impact on California's R&D enterprise and the overall California economy.

California is unusually dependent on defense R&D. Defense procurement dollars helped to fuel California's economic boom in the 1980s, and the end of the Cold War and the accompanying defense cutbacks helped to plunge the state into a recession in the early 1990s from which it is only now recovering. California has regularly received between a quarter to a third of the Department of Defense's R&D. Because DOD funds over half of total federal R&D, swings in defense R&D and California's exposure to these swings account for the rise in federal R&D to California and California's share of total federal R&D in the late 1980s and the fall in the early 1990s (see Chart 6 and Chart 7).